Estimated reading time: 11 minutes
Getting out of credit card debt might feel overwhelming, but there are proven strategies that work.
The most important thing to remember is: Credit card debt is nothing to be embarrassed about, it’s very common, and with the right strategy, you absolutely CAN get it back to $0!
Australian Credit Card Debt Statistics:
This data from the RBA and Money.com.au, shows that credit card debt is very common, and how much debt Australians are carrying!
- Average balance owing per account: $3,624
- Average balance being charged interest: $1,806
- Average interest rate: 18.52% p.a.
- Total credit card accounts: 12.29 million
- Total credit card debt: $44.57 billion
Let’s look at what you can do about your credit card debts…
Key Takeaways:
- If you’re not able to pay off your credit card, stop using your card immediately to prevent debt from growing.
- Choose a repayment strategy that matches your personality. Consider Avalanche for maximum savings or Snowball for motivation (see more down below).
- Balance transfers can help, but only if you have a solid payoff plan and avoid new purchases.
- Cutting non-essential expenses by just $100-200 a month, can really speed up your path to debt freedom.
- Professional guidance and support is available for FREE through the National Debt Helpline.
- Consistency beats perfection; even small extra payments make a difference when applied regularly.
6 Proven Strategies to Eliminate Credit Card Debt
The top 3 questions asked about credit card debt in forums across Australia:
- “Which debt should I pay off first?”
- “Should I use a balance transfer or get a consolidation loan?”
- “How long will it take to pay this off?” / “Can I ever get out of this?”
Do these sound familiar? If you have credit card debt, you probably need to know the answer to these questions yourself. So, let’s answer them by looking at 6 proven strategies for clearing debt.
Note: these methods are not detailed financial advice tailored to you. If you need help or advice, please use a registered financial advisor, or refer to strategy six below to access free advice.
1. Put Your Card Out of Sight, Out of Mind
The first step is simple but powerful: Stop adding to your debt!
Take your credit card out of your wallet. Put it somewhere safe like a locked drawer, your parents’ house or somewhere else that makes it inconvenient to get your hands on. Some people even put their card in a tub of water and put it in the freezer! You can’t use it if it’s trapped in a block of ice!
Next, remove your credit card from Apple Pay, Google Wallet and other payment apps.
Delete your credit card from shopping websites like Amazon. If you have to leave some default payment method, then enter a debit card.
When your card isn’t at your fingertips, and when your devices and websites are not set up to grow your debt, you can’t make those impulse purchases. This makes you take more time to think about whether you genuinely need to buy something or not.
You don’t need to cut up your card, just create some friction between you and that “buy now” button.
2. The Avalanche Method: Tackle High-Interest Debt First
If you have multiple credit cards, this simple but very clever strategy saves you the most money over time.
How the Avalanche method works:
- List all your cards by interest rate, highest to lowest.
- Make minimum payments on all cards except the one with the highest rate.
- Put every extra dollar toward that highest-interest card.
- Once it’s paid off, cancel the card and move on to the card with the next highest rate.
This method helps to slow or stop the most expensive debt from growing. Even an extra $50 payment per month can make a significant difference when applied consistently.
3. The Snowball Method: Build Momentum with Quick Wins
If you need motivation more than maximum savings, the Snowball Method might be your perfect match.
How the Snowball method works:
- List your debts from smallest to largest balance.
- Pay minimums on everything except your smallest debt.
- Attack that smallest debt with all your extra money.
- Celebrate when it’s gone, then roll that payment into the next smallest.
The sense of achievement you get with the Snowball method is very strong. Seeing debts disappear keeps you motivated and builds confidence.
4. Use Balance Transfer Cards Strategically
Many Australian banks offer balance transfer cards with 0% interest for 6-24 months. This can pause your interest charges while you pay down the principal. Be careful, though – this may not be the best option for you.
Before you transfer:
- Check the interest rate after the promotional period ends.
- Understand any transfer fees (usually 2-3% of the balance).
- Make a realistic payment plan to clear the debt before the 0% period expires.
- Avoid making any new purchases on the transfer card, as these often attract higher interest rates.
TIP: Set a calendar reminder for one month before the promotional period ends, so you’re not caught off guard.
5. Trim Your Budget and Redirect the Savings
This is where you find the extra money to increase your credit card payments from income you already receive. It sounds impossible but this clever strategy is worth doing every year, even when you aren’t trying to pay off credit card debt, as it can really help you boost your savings.
Here’s how it works:
You start by reviewing your last three to six months of bank statements and sort every expense into one of two categories:
- Essential expenses
These are expenses you can’t eliminate such as:
- Rent or mortgage
- Utility bills
- Groceries
- Transport
You can’t eliminate these expenses but quite often you can reduce them, considerably. For more information on how to do that, visit our post: Loyalty Tax – What is it and how to avoid paying it.
- Non-essential expenses
Expenses you could possibly cancel, reduce or pause, as follows:
- Dining out
How to reduce: Try cutting down on or eliminating eating out until you feel more in control of your credit card debt. - Gym memberships
How to reduce: Consider switching to free home workouts temporarily or exercising in the park with a friend. - Shopping for non-essentials
How to reduce: A good strategy is to implement a 48-hour waiting rule, to remove those impulse buys.- Making yourself wait 48 hours before a purchase means your brain has time to switch gears from emotional, impulsive thinking to logical, rational thinking. It can be a real game changer!
- Streaming subscriptions
How to reduce: If you have more than one streaming subscription, it’s time to let some go. It doesn’t always have to be forever.
You’ll be amazed how trimming just $100-200 off your expenses per month can shave months or years off your debt repayment timeline.
Additional Etax resources to help with credit card debt and saving strategies:
Read these other money saving resources from Etax to help you pay less and save more, so you can pay off your credit card sooner.
- How to cut expenses and save more money
- Loyalty Tax – What is it and how to avoid paying it
- How to save money – 3 money saving tips to ignite your savings
6. Get Professional Debt Support
If your debt feels unmanageable or you’re juggling multiple high-interest accounts, professional help can provide clarity and relief from the stress of trying to pay off your credit card debt. Debt counsellors/advisors can help you structure your payments, help you negotiate with card providers, prioritise debts and consolidate accounts.
Contact the National Debt Helpline (1800 007 007) for free, confidential advice.
Why Are Credit Cards So Hard to Pay Off?
Credit card debts are a nagging problem for many people, mostly because,
- we keep using the card while we try to pay it off, and,
- credit cards have very high interest rates, which makes the debt grow – fast – over time.
Making just the minimum payments is, in a sense, what the banks and lenders want you to do. Why? Because minimum payments means maximum interest paid – and interest payments are pure profit for those companies.
A quick example:
- $4,000 credit card debt
- 18% interest
- Minimum payment offered by the bank of $80 per month
- Time to pay it off using minimum payments: about 7 years and 10 months
- How much interest gets paid to the bank? About $3,449
High interest rates and low minimum payments mean, the items you buy on credit can cost you 2X more than you think you paid!
But don’t panic, there are ways to dig out of this trap.
Now, here are some real-world examples of credit card debt clearing strategies:
Credit Card Debt Busting Strategy: Case Study 1
Sarah’s Streaming Success:
Sarah, 28, from Melbourne, had $4,200 in credit card debt at a 19.5% annual interest rate. At the time, she was spending $147 each month on five streaming services, in addition to a gym membership she rarely used, and frequent meal delivery.
By cancelling four streaming services ($87), pausing her gym membership ($59), and cooking at home instead of ordering delivery ($150), Sarah freed up $296 per month. She put that entire extra savings toward her credit card balance.
As a result, she paid off the debt in about 15 months. If Sarah continued making only minimum payments, the balance would likely have taken more than four years to clear. Accelerating her payments reduced the total interest she paid by an estimated $1,800–$2,000, while also eliminating the debt years earlier.
Sarah told us:
“I didn’t realise how much those small subscriptions added up. Cutting them felt like finding money I didn’t know I had.”
Credit Card Debt Busting Strategy: Case Study 2
Marcus Takes Control:
Marcus, 35, from Brisbane, accumulated $8,700 in debt across three credit cards with interest rates ranging from 18% to 21%. Although he was making minimum payments totalling $420 per month, a large portion of each payment went towards interest, and the balances decreased very slowly.
After speaking with a financial advisor, Marcus consolidated the three cards into a personal loan with an interest rate of 11.5% – almost half of what the credit card companies charged.
By switching to the lower-interest loan and making consistent payments, Marcus paid off the entire balance in just over two years. If he was only making minimum payments, the debt would have taken well over a decade to repay.
Marcus told us:
The advisor showed me exactly where my money was going and gave me a plan I could actually stick to, so I finally saw progress.
Important Note:
Case studies based on real Etax client experiences with names changed for privacy. Always talk to a finance professional before taking out loans or consolidating debts. It may not be the right strategy for your personal situation, so it’s very important that you get the right advice.
Final Note on Paying Off Credit Card Debt
The difference between staying in debt and breaking free isn’t luck, it’s about getting the right advice and staying consistent. Unfortunately, credit card debt often worsens with time, so make today the day you take back control.
You’ve got this!
Frequently Asked Questions
It depends on your balance, interest rate, and payment amount. For example, a $3,500 credit card balance at 19% interest with minimum payments of about $70 per month can take well over 20 years to pay off, with most of each payment going toward interest. However, by adding just $100 more per month (increasing to $170 total), you can eliminate the debt in roughly 3.5 years and save thousands of dollars in interest charges.
Absolutely! It’s one of the smartest moves you can make. Use any windfall, like tax refunds, bonuses, or gifts, to make lump-sum payments on your highest-interest debt. If your taxes aren’t up to date, Etax can help.
No! It actually improves your score by lowering your credit utilisation ratio. You can keep the account open after paying it off to maintain your credit history, even when you don’t use the card.
Contact your credit card provider immediately. Many offer hardship programs that can temporarily reduce your interest rate, waive fees, or adjust payment terms. The National Debt Helpline can also help you negotiate with creditors and explore options like payment plans.
Debt consolidation can work well if you qualify for lower interest and if you won’t accumulate new debt. It simplifies payments and saves money. Always speak with a free financial counsellor to see if it suits your situation.
Yes! Try to build a small emergency fund first, then focus on debt. This prevents you from relying on credit cards when unexpected expenses arise. Once your debt is cleared, you can focus on growing your emergency fund to 3-6 months of expenses.
Please Note: This article provides general information only. For advice specific to your situation, always consult with a registered financial advisor or debt counsellor.
Useful Resources:
- National Debt Helpline – free financial counsellors and support.
- Moneysmart.gov.au – info on dealing with debt collectors and rights.
- Consumer Action Law Centre credit card debt tools – legal guidance.
- Gambling? If your debt is due to a gambling problem, search for “gambling debt help” to find free and confidential help in your State.
